INTERVIEW-China's Africa envoy says South Sudan oil may flow by November

September 15, 2012|Reuters

By Michael Martina

BEIJING, Sept 15 (Reuters) - South Sudan may resume pumpingoil as soon as November, China's ambassador to Africa said,adding Beijing was optimistic leaders in Juba will soon reachpricing terms with Sudan on piping crude through the countryfrom which it recently split.

China's special envoy to Africa Zhong Jianhua has madeseveral trips to the landlocked African nation that seceded fromSudan in mid-2011, holding talks with officials from Khartoumand Juba where Chinese oil companies are heavily invested.

South Sudan halted oil flows in January during its disputewith Khartoum over how much it should pay to export crudethrough pipelines in Sudanese territory to a Red Sea port.

Fighting along the 1,800-km (1,200-mile) border threatenedto turn into a full-scale war in April when the South seized theHeglig oil-producing region long held by Sudan.

Tensions have lowered to a point where Beijing envisions"several agreements" being signed in September, Zhong toldReuters in an interview on Friday.

"If the two presidents (of Sudan and South Sudan) meetsometime around the twentieth of September and sign severalagreements, I will not be surprised," said Zhong, who made histhird trip to South Sudan several weeks ago.

"We would expect that they will probably still carry outnegotiations for other matters such as demilitarisation, cushionzones between borders, and the withdrawal of troops, so that bythe end of the year -- the resumption of oil production byNovember -- that is what we expect," he said.

Sudan and South Sudan have held border security talks in theEthiopian capital Addis Ababa, facing a U.N. Security Councildeadline of Sept. 22 to reach a deal or risk sanctions.

PRELIMINARY DEAL

Zhong's outlook is slightly more optimistic than projectionsby South Sudan oil officials, who have said resuming output inUpper Nile state, home to South Sudan's most productiveoilfields, was possible by year's end. Turning on wells in thestate of Unity would probably take longer.

The South reached a preliminary deal on transit fees withSudan last month that could open the way to resuming oilexports, but Khartoum still wants a deal to secure the volatileshared border before crude flows resume.

China, heavily invested in the oil sector of both nations,has found itself caught between its long-time ally in Khartoumin the north and its new partner in the South, which inheritedthree quarters of Sudan's oil output after the split.

The military standoff earlier this year was evidence of howChina's hunger for resources and expansion abroad has at timesput it in an uncomfortable position when dealing with othercountries' disputes. Sudan had been one of China's top foreignsuppliers of crude oil.

Zhong credited the United States with helping to bring thetwo feuding nations back from the brink.

"The tension has already been dramatically reduced since theconflict in the Heglig oil fields because of the tremendouspressure applied by the American government on the South Sudanauthorities," he said.

South Sudanese officials have said the country was producingabout 350,000 barrels per day (bpd) before the shutdown. Much ofthat went to China, the biggest buyer of South Sudan's oil,which last year imported 260,000 bpd of crude from the twocountries, according to the International Energy Agency.

China had called for restraint between the two sides whenSouth Sudan President Salva Kiir visited Beijing in April at theheight of tensions, claiming that Beijing's long-time ally haddeclared war on the South.

"We told President Kiir, we are very willing to help ... butour experience tells us that if there is not a peacefulenvironment it will be very difficult to do," Zhong said.

South Sudan had criticized China after that visit for notplaying a more active role in a north-south settlement.

The South has welcomed China's offers of development fundsand its investment in the oil industry, but many still viewBeijing with a degree of suspicion after years in which it actedas one of Sudanese President Omar Hassan al-Bashir's strongestsupporters.

Zhong said officials in Juba had not fully understood thedamage halting oil production would do to its already strugglingeconomy.

South Sudan relied on oil for about 98 percent of staterevenues before the shutdown and has struggled to make up forthe loss through loans and boosting taxes.

"South Sudanese leaders have felt more directly than we havethe problems created from ceasing oil production," he said.